‘REO Listings' Offer an Opportunity to Score an Affordable Home
The current housing market can be a living nightmare. Not long ago, lenders would smoothly provide 3% mortgages without blinking. However, interest rates are leaning closer to 7% now. In the meantime, median home prices are skyrocketing, currently exceeding $430,000 nationwide. To comfortably afford a house in nearly half the country, you'll need a six-figure income.
If you're set on purchasing a home but the prices are giving you premature gray hair, it might be worth considering post-foreclosure properties, which go by the name real estate owned (REO) properties.
Why purchasing a real estate owned (REO) property can save you money
A real estate-owned (REO) property is one that a bank or other lender has claimed following a foreclosure, left unsold at auction or through a short sale. Now the bank owns the property, earning them a fervent wish it didn't. Banks are not associated with real estate or property maintenance, and maintaining properties on their books can increase their financial risk.
This can make the bank an especially motivated seller, promising a win for you: REO homes are typically listed at competitive prices—known as the REO discount, which can offer up to a 41% cut from market value. You're not entitled to save that much, and you might not find a luxury home at knock-down prices, but you can definitely save a pretty penny through the REO route.
There's one caveat, though—REO properties are typically sold in "as-is" condition, so if the former owner neglected upkeep and maintenance as their ownership drew to a close, you might have a lot of costly repairs to handle. On the bright side, banks will likely have scrubbed their books clean of liens or debts (like unpaid property taxes) to avoid any legal hassles, making sale-friendly. If you're comfortable with buying a fixer-upper that may need significant renovations, buying an REO home from a bank could save you a packet.
How to discover REO listings
To find REO listings, it takes a bit of detective work because there's no central directory to cross-reference. However, there are common methods for locating them:
- Bank websites. Banks may maintain departments exclusively for REO properties and list their offerings online. Bank of America, for example, lists their REO houses here.
- The Multiple Listing Service (MLS). The MLS is a tool often utilized by real estate professionals, which also offers listings of REO and foreclosed properties. Some banks may have their REO inventory highlighted on the MLS.
- Foreclosure databases. Each REO property begins its life as a foreclosure, so monitoring unsuccessful foreclosures can lead you to profitable opportunities. Check out foreclosure databases like RealtyTrac, Auction.com, or Foreclosures.com. Similarly, actual estate databases like Zillow or Trulia can help you out, as they too list foreclosed properties. Keep an eye on a specific property if it fails to sell.
- Government databases. Government entities write loads of home loans and end up with REO properties themselves. When this happens, they list them under HomePath (Fannie Mae properties) and HomeSteps (Freddie Mac). And there's HUD Homestore, too, which includes properties from the Federal Housing Administration.
- A seasoned realtor. If REO homes are your target, seek out a skilled realtor in your area with REO experience and who has received a short sale and foreclosure resource (SFR) accreditation from the National Association of Realtors (NAR). The NAR operates a searchable database of these agents, supporting your quest for a local expert. Also, ensure you're pre-approved for financing. Banks yearn to shift REO houses off their books, so they like knowing you're ready to make a purchase.
Read also:
In the pursuit of an affordable home in the current market with soaring interest rates and median prices, you might find it beneficial to explore real estate owned (REO) listings, which offer the potential for significant savings due to the REO discount. To discover these money-saving opportunities, you can check bank websites, the Multiple Listing Service (MLS), foreclosure databases, government databases, or work with a seasoned realtor with REO experience.
